SPRINGFIELD, IL - Illinois Comptroller Judy Baar Topinka on Friday warned that the economic impact on the state budget could exceed $1 billion if Congress and the President are unable to reach an agreement to prevent the federal government from going over the "fiscal cliff."

Just more than three days before automatic federal spending cuts and tax increases are triggered, Topinka estimated that the combination of expected Social Security payroll tax and income tax increases is expected to hit Illinois pocketbooks, and ultimately lower the state's tax revenues by up to $500 million.

Even more staggering, the fallout from the fiscal cliff threatens to push the state into recession, Topinka said.

"Illinois is already spiraling in a mix of unpaid bills, unfunded liabilities, interest costs and credit downgrades," Topinka said. "By going over the fiscal cliff, the federal government will essentially be wrapping an anchor around our ankle - and the consequences will be devastating."

Specifically, Topinka noted that a scheduled 2 percent increase in the Social Security payroll tax rate could cost Illinois residents up to $6 billion in take-home income, which could translate into millions in lost sales tax revenue as consumers reduce their spending to compensate. In addition, across-the-board increases in federal income tax brackets would have a similar impact, but on a larger scale. Combined, the state could lose $400-$500 million in sales tax revenue alone this year.

If the state falls into recession as a result of the fiscal turmoil, spending and employment levels, and ultimately income and sales tax revenues, would fall further. Automatically-triggered spending cuts would further darken Illinois' fiscal picture, with the state losing more than $300 million in federal grants for education, public housing, and nutrition programs for low-income women and children alone.

The potential fiscal consequences come as the state is already saddled with more than $7.4 billion in unpaid bills at the Comptroller's Office, and an additional $2.3 billion at state agencies.

"Illinois has a big enough mess to clean up as it is - we don't need any more 'help' from Washington," Topinka said. "Yet, the high-stakes game of 'chicken' continues in our nation's capital. It needs to end immediately, before we all lose."

Daniel I never once used the word inflation. When the government prints money and floods the system with dollars this drives down the value of each dollar. This is economics 101 as anyone who has ever studied this issue knows. You can claim all you want that deficit spending does not harm the economy but the facts show just the opposite. Supply and demand does cause inflation but it can also be caused by the printing of money with nothing to back it up and deficit spending. You can say the full faith of the U.S. Government but once that faith erodes as it is now, you will have inflation. Brazil is a prime example of what can happen when the government prints money with nothing to back it up and spends to much. One of the main issues that prompted the problem was excessive government spending. Brazil suffered through hyper-inflation of up to 30,000%. Here is a good article explaing what happened to Brazil.
http://ezinearticles.com/?A-Short-History-of-Inflation-in-Brazil&id=3817254

Food prices are not counted in the CPI index. They are high because of the drought. A good harvest and they will drop. However if you go to the BLS site you will discover inflation is low by historic standards.

How much of your income was taxed "FOR SOCIAL SECURITY" last year?? If you made less than $103,000 , you paid S.S. tax on ALL of your income. How would you like it if you only had to pay S.S. tax on your 1st paycheck. And the rest of the year, you paid NO S.S. taxes at all?? Thats what the C.E.O. of the company I work for does. IN FACT, he had reached the S.S. tax ceiling ( $103,000.oo ) on his 1st DAY at work. And when he turns 65, I hope he's first in line to sign up for his "entitlement". But, in the mean time, WHY does the 95% of us pay S.S. tax on EVERY PENNY WE MAKE. Yet those "OVERTAXED" few at the top get yet ANOTHER break.
McConn-man, bought and paid for.

You know Gerald that tax cut in your social security is from Obama. He proposed it and wants to extend it. You've been screaming inflation and higher interest rates forever, but inflation is low by historical standards and interest rates are lower. But if you believe high inflation is coming, then can I have your dollars? Of course inflation is caused by supply and demand.

Your wasting your breath george. The people just voted the biggest deficit President in our history back into office for 4 more years of debt and higher taxes. I will bet that most people do not know that their Social Security Tax will automatically go up from 4.2% to 6.2% starting January 2013. No one is talking about this tax hike. Just wait until they tax your health insurance premiums and the money your employer contributes to your health insurance. In order to pay for Obama Care and all the spending in Washington you are going to see your taxes skyrocket. It is going to happen because there is no way they are going to cut spending. The will cut the increase in spending and then claim they cut spending and the sheep will believe it. Taxes will go up and spending will increase. This is the reality of America in 2012. We have elected fools to lead this country plain and simple. Both parties are to blame for this. Bush included. This has to stop but I see no incentive for congress or the President to cut spending. It is political suicide to even discuss cutting entitlement spending which will eventually have to be done. They just keep kicking it down the road. In the mean time the value of your dollar just keeps eroding due to deficit spending.